Archive
The Advantage Newsletter — 4/28/2006
| Chlorine: | Effective Operating Rates Estimated Average Wellhead Prices |
| 2005 | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sept | Oct | Nov | Dec |
| CL2EOR | 99%-- | 101%-- | 96%-- | 93%-- | 91%-- | 91%-- | 91%-- | 86%-- | 75%-- | 81%-- | 93%-- | 86%-- |
| Prices Per MMBtu | $5.37-- | $5.44-- | $5.82-- | $6.27-- | $5.86-- | $5.99-- | $6.51-- | $7.48-- | $9.50-- | $10.68-- | $9.29-- | $9.76-- |
| 2006 | Jan | Feb | Mar | Apr | May | June | Jul | Aug | Sept | Oct | Nov | Dec |
| CL2EOR | 90%-- | 86%-- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- |
| Prices Per MMBtu | $8.43-- | $7.09-- | $6.35-- | -- | -- | -- | -- | -- | -- | -- | -- | -- |
MARKET ANALYSIS UPDATE April 28, 2006
The K.A. Steel ADVANTAGE offers insight into current trends and essential market analysis allowing you to make insightful, well-timed purchasing decisions. With K. A. Steel, customers have the benefit of knowing what K. A. Steel knows. Our customers receive timely coverage of trends in the industry as quickly as the information emerges.
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As we enter May, rhetoric begins to mount on speculation for price increases on both chlorine and caustic soda as bleach season begins. Imports from Asia have begun to show signs of vulnerability as China becomes more self-sufficient and oil continues to rise. Europe is currently going through what the U.S. experienced during hurricane season, which is sharp rises in the cost of energy. It is reported that power cost in England has increased by a multiple of seven. This coupled with increased freight cost has pushed imports to the U.S. up $20-$40 per dry short ton. Due to the lackluster demand in Asian returns on chlorine, which are reported to be negative, therefore disallowing any future discounts on caustic soda at least until chlorine demand and profitability returns. As imports increase in price, the differential or gap between domestic supply and imports have narrowed to the point that producers domestically may reengage supply to the East coast. This reengagement may offer domestic producers an additional outlet for caustic soda as chlorine ramps up for the summer season. It is K.A. Steel Chemicals belief that despite some of the imbalances in product dislocation, caustic soda prices will continue to fall throughout 2006. The question in our mind, “Is at what rate?” We have seen significant relief since the end of 2005. We believe with the current situation on negative returns being reported in Asia, imports will slow and prices on the coastal market may inch up or at least stabilize as domestic prices continues to drop at a slower rate due to the increased demand or void in the coastal markets. The fundamentals in the U.S.A. have not changed. The high cost of energy continues to plague the United States as well as Europe and Asia. The price of oil in excess of $70 per barrel may give the U.S. producer a slight edge today in comparison to $7-$8 per mmbtu Natural gas. This edge or differential doesn’t compare to low cost of natural gas in the Middle East. It is our belief that as the Middle East, such as Saudi Arabia and Qatar, continues to add capacity (Membrane capacity) we will soon see the Middle East caustic soda on the east coast of the US. It is reported that Oxy will shut down its Muscle Shoals, AL Chlorine/KOH production by 2008. Oxy will also convert its Taft, LA caustic soda membrane plant to a KOH plant. This loss of caustic soda membrane capacity equates to roughly 38% of Shin-Techs new facility scheduled to come online around 2008. There has been a lot of talk and rumor about smaller Chlor-Alkali facilities popping up in places such as Kentucky and Indiana. It is our belief that most of these facilities will never get off the ground or warrant further consideration. It would not surprise us if one or two of these facilities were announced for startup in 2008 in more strategic areas other than Kentucky or Indiana. We will keep you advised of any other further developments.
